Investment Focus

LMI and Minority Communities

LMI and minority communities are often economically disadvantaged areas that, as a result, may suffer from standards of living and employment conditions that are below national norms.

 

In addition to LMI communities, the Diamond will invest in businesses that are located in communities with large minority populations and businesses in which the equity is significantly owned by minorities.

The Principals believe that the Diamond’s proposed activities are well suited for underserved communities. Immigration and changing demographic trends in the U.S., combined with the large number of LMI or Ethnic Minority Businesses and competitive advantages these businesses derive from their location or minority certification, should present the Diamond with a large and attractive set of investment opportunities.

It is well documented by the National Minority Supplier Development Counsel (minority vendor and diversity trade association) and the U.S. Minority Business Development Agency that minorities and women enjoy preferential purchasing initiatives with government, diversity, and corporate initiatives.

Despite the presence of attractive underlying investment fundamentals and strong financial accomplishments, senior executives of LMI or Ethnic Minority Businesses often cite financial constraints as an impediment to future growth. The Principals believe that the lack of dedicated financial resources for LMI or Ethnic Minority Businesses creates the opportunity for attractive returns on investments for investors with the knowledge, skill and discipline to identify opportunities in these challenging and sometimes politically complex environments.

The following table summarizes the geographic concentration and industry clusters of Ethnic Minority Businesses in select metropolitan areas across the U.S.

Geographic and Industry Profile of Ethnic Minority Businesses

(1) Metropolitan Statistical Areas for the following areas have been combined due to geographic proximity: San Francisco, CA and Oakland, CA; Washington D.C. and Baltimore, MD; Miami, FL and Fort Lauderdale, FL; and Raleigh, NC, Durham, NC and Charlotte, NC.

(2) Industry clusters exclude real estate and commercial and residential construction given that SBA regulations prohibit the Diamond from investing in such businesses.
Source: United States Census Bureau 1997 Economic Census, Survey of Minority- and Women-Owned Businesses. Only certain statistics will be updated in the 2010 Census.

Demographic Trends Affecting LMI and Minority Communities
Statistics indicate that minorities (U.S. citizens who are African-American, Caribbean, Hispanic, Asian and Pacific Islanders, or American Indian) will comprise a significantly greater percentage of the overall U.S. population in the coming years.

Driven primarily by immigration trends into the U.S. over the past 30 years and the larger average size of minority households, minorities will increase at a compound annual growth rate that is seven times faster than the growth rate of non-minorities between 2000 and 2030, and will increase from 28.5% to 37.0% of the total U.S. population over the comparable period, according to the U.S. Census Bureau estimates.
The following table illustrates trends in U.S. immigration by region of last residence from 1821 through 2000.

Historical U.S. Immigration Trends

Note: Other areas include Africa, Oceania and countries not specified until 1925.
Source: Immigration and Naturalization Service, Immigration by regional and selected country of last residence: fiscal years 1820 – 2000.

Aggregate Size and Number of LMI and Ethnic Minority Businesses
Diamond will benefit from the aggregate size and large numbers of LMI or Ethnic Minority Businesses in the domestic economy. In addition, while the investment focus is primarily on the Mid-Atlantic and Southeastern regions of the U.S., the Diamond will have the ability to selectively consummate investments in LMI or Ethnic Minority Businesses located throughout the U.S. and operating within diverse industries. By opportunistically broadening the geographic and industry focus, the Principals believe the Diamond is better able to execute the outlined investment strategy and to build lasting enterprise value with portfolio companies. The following map illustrates the broad geographic locations of LMI communities in America and concentration of Ethnic Minority Businesses.

Select LMI Communities and Concentration of Ethnic Minority Business

Source: United States Census Bureau 1997 Economic Census, Survey of Minority- and Women-Owned Businesses.

Demographic, Legislative, and Business Trends for Veterans
There are over 20 million veterans in the United States today and approximately 50% are minorities and women. Ethnic Minority and Women-owned businesses may benefit from incentive programs established by the Federal Government for them specifically as well as programs for veterans if they are also in that group of Americans. Veterans enjoy preferences and advantages even greater than minorities and women particularly service disabled veterans who have certain no-bid high priority preferences.

The Saving Our Heroes Act, for example, offers employment tax credits, incentives to hire and related benefits. The International Franchise Association announced a program to waive, finance, or eliminate, franchise fees for veterans. The Federal Government is required to deploy 3% of contracts to veterans through the VA. Mr. Peek in his roles at Treasury participated in numerous sessions where the Department of Defense (DOD) and Veteran Administration discussed stepping up enforcement of Federal laws in contracting.

Additional programs include: Veteranscorp, a national veteran agency that is establishing a $10 million early stage fund to help veterans; and the Jobs Act of 2010 requires states to market Treasury allocated dollars to minorities, women, and veterans.

The following chart shows that veterans are in Diamond’s investment geography: